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A frequent political talking point — when issues of tax law and corporate governance are concerned — is the lack of income taxes Amazon pays to the federal government. In 2018, Snopes rated “True” the claim that the online retailer had paid no such taxes in the 2017 tax year. Readers raised the same question for the 2018 tax year, and once again our rating is “True.”
Though Amazon’s actual U.S. tax filings are not public, a broad overview of their overall tax burden can be found in their SEC 10-K filing. In 2018, the company made over $200 billion in sales, but paid no money to the U.S. government in the form of income tax (in fact, the government actually owed the company some $129 million as noted in parentheses in the chart below):
However, the company did pay taxes abroad and at the state level: “Amazon pays all the taxes we are required to pay in the U.S. and every country where we operate, including paying $2.6 billion in corporate tax and reporting $3.4 billion in tax expense over the last three years,” an Amazon spokesperson told Yahoo Finance in February 2019.
As we discussed in our previous Amazon tax fact check, the methods employed to make that extremely reduced tax burden a reality are only vaguely described by the company, but the process involves taking as many tax credits as possible under the law. “We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that are being utilized to reduce our U.S. taxable income,” the company wrote in their SEC filing.
Stock-based compensation refers to the fact that publicly traded corporations, like Amazon, can list the stock options they grant to employees as a business cost in their accounting, and if an option-receiving employee makes over $1 million a year in salary, the profits from the sale of those stocks can then be counted as a federal income tax deduction for the corporation.
With respect to the other tax credits or deductions? “It’s hard to know exactly what they’re doing,” Steve Wamhoff, director of federal tax policy for the non-partisan Institute for Taxation and Economic Policy, told Yahoo. “Their public documents … don’t lay out their tax strategy. So it’s unclear exactly which breaks [Amazon is taking advantage of].”
Regardless, it is factually true that Amazon paid nothing in federal income tax in 2018.
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(THIS ARTICLE IS COURTESY OF THE BRAZILIAN NEWS AGENCY 247)
(THIS SHOULD BE NO SURPRISE, HE IS A HABITUAL LIAR AND COWARD JUST LIKE HIS IDOL, TRUMP!) (oldpoet56)
Bolsonaro must even flee UN General Assembly
Jair Bolsonaro, who previously said he would “even on a stretcher” at the opening of the United Nations General Assembly, must remain in Brazil, claiming health care. Advisers say he would be the object of protests over the destruction of the Amazon. Another fact that motivates manifestations against him are his public praise for dictators and his postures against the most elementary principles of civilization.
Updated September 18, 2019, 2:42 AM
247 – Jair Bolsonaro is expected to flee the opening of the United Nations General Assembly on September 24, although he said he would “go wheelchair-wise.” “Members of Planalto Palace already admit that the chief executive may not attend the event next week in New York, United States. Officially, the alleged reasons are only medical restrictions. Bolsonaro recovers from surgery to correct a hernia However, even before the medical procedure, some advisers privately assess that, after controversies involving the burning of the Amazon rain forest, there is also a political risk for the possibility of protests, “said journalists Jussara Soares and Gustavo. Maia, in a report published in Globo.
“Among the president’s aides and family members, there is disagreement about whether or not to go to the UN. The medical team that performed the last surgery and people close to Bolsonaro recommend that he not travel to preserve himself. Interlocutors told the report that the first Michelle Bolsonaro tries to convince her husband to cancel the trip. Another group argues that the moment is crucial for the Bolsonaro government to stand before the international community and make a public defense of the sovereignty of the Amazon, “says the report, without paying attention. to the fact that Bolsonaro intends to open the Amazon for commercial exploitation by Donald Trump.
Another fact that motivates manifestations against him are his public praise for dictators and his postures contrary to the most elementary principles of civilization. According to Ambassador Rubens Ricupero, Bolsonaro is an unrepresentable figure in the world.
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While the world’s attention has been focused on the fires raging in the Amazon rain forest in Brazil, indigenous people living there have warned that the policies of President Jair Bolsonaro pose a bigger threat to their existence.
Rival groups have now come together to fight the government’s plans for the region that is their home, as BBC News Brasil’s João Fellet reports from the Amazon village of Kubenkokre.
Dozens of indigenous people gathered in this remote part of northern Brazil last month after travelling for days by bus and boat.
The meeting brought together formerly sworn enemies such as the Kayapó and the Panará.
The two groups were at war for decades, raiding each other’s villages in tit-for-tat attacks. The warring came to a brutal end in 1968, when an attack by the Kayapó, who came armed with guns, left 26 Panará, who only had arrows to defend themselves, dead.
Tensions remained high for years but according to those gathered in Kubenkokre, the two sides have now overcome their animosity for a greater goal.
“Today, we have only one enemy, the government of Brazil, the president of Brazil, and those invading [indigenous territories],” Kayapó leader Mudjire explained.
“We have internal fights but we’ve come together to fight this government.”
His words were echoed by Panará leader Sinku: “We’ve killed the Kayapó and the Kayapó have killed us, we’ve reconciled and will no longer fight.”
“We’ve got a shared interest to stand together so the non-indigenous people don’t kill all of us,” he said, referring to the threats posed by the arrival of miners and loggers carrying out illegal activities in their area.
‘69,000 football fields lost’
More than 800,000 indigenous people live in 450 demarcated indigenous territories across Brazil, about 12% of Brazil’s total territory. Most are located in the Amazon region and some groups still live completely isolated and without outside contact.
President Jair Bolsonaro, who took office in January, has repeatedly questioned whether these demarcated territories – which are enshrined in Brazil’s constitution – should continue to exist, arguing that their size is disproportionate to the number of indigenous people living there.
His plans to open up these territories for mining, logging and agriculture are controversial, and any change to their status would need to be passed by the Brazilian Congress.
But it is something that worries the indigenous leaders gathered in Kubenkokre. “Other presidents had more concern for our land. [Mr Bolsonaro] isn’t concerned about this, he wants to put an end to what our people have and to how we live,” explains Panará leader Sinku.
“That’s why I have a heavy heart and that’s why we’re here talking to each other.”
In some demarcated areas, loggers and miners are already at work after some local indigenous leaders granted them permission.
Indigenous leader Bepto Xikrin told the gathering how some 400 miners and loggers had illegally entered the Bacajá territory since the start of the year. He said that members of his indigenous group were scared and did not know what to do.
And according to a network of 24 environmental and indigenous groups, Rede Xingu+, an area equivalent to 69,000 football fields was destroyed between January and June of this year alone in the Xingu river region.
Heavy machinery has caused major damage and the Fresco and Branco rivers that run through the region have been contaminated with mercury.
Kayapó leader Doto Takakire said illegal mining had been further encouraged by the fact that it often goes unpunished.
Analysis by BBC Brasil shows the number of fines handed out by the Brazilian Institute of Environment and Renewable Natural Resources (Ibama) for environmental violations has dropped significantly since President Bolsonaro took office on 1 January.
Mr Bolsonaro has in the past pledged to limit the fines imposed for damaging the Amazon and many blame the president for Ibama’s current weak position.
‘We won’t repeat the past’
At the meeting – which was held in both Portuguese and Kayapó – participants discussed projects for their region’s economic developments which do not contribute to deforestation, such as handicrafts and the processing of native fruits.
“[I’m concerned] about the trees, water, fish, the non-indigenous people who want to enter our land,” explained Sinku. “I don’t want to contaminate the water with [toxic products from] mining… That’s why I’m here.”
Indigenous groups which have allowed miners on to their land were not invited, an omission which some of those attending described as a missed opportunity.
“There’s no-one here who wants agribusiness or mining in their villages, so are we just going to talk amongst ourselves?” Kayapó leader Oé asked.
The fires which have been burning across the Amazon were not a big topic of debate at the gathering, in part because they have mainly happened outside protected indigenous reserves but also because those gathered consider illegal mining and logging as more pressing threats.
“We won’t repeat the past,” Kayapó leader Kadkure concluded. “From now on, we’ll be united.”
Molasses explode across the country against Bolsonaro and the devastation of the Amazon
Thousands of Brazilians protested with panellos in various cities in Brazil against Jair Bolsonaro and the devastation of the Amazon stimulated by him. During a radio and TV chain statement, Bolsonaro attributed the increase in burning to dry weather. Meanwhile, Brazilians were beating pans and asking for their departure. The hashtag # panelaço is Twitter’s most talked about subject
247 – Jair Bolsonaro was targeted by panellists in various parts of the country on Friday evening, 23, during a televised address in which he spoke about the devastation of the Amazon Forest due to fires and deforestation.
The reason is Bolsonaro’s destructive and negligent environmental policy that has been causing the destruction of the Amazon rainforest, which burns in flames due to the increasing burning in his government.
The climate of widespread indignation against the government is the same as can be observed between 2015 and 2016. The movement led to a popular outcry that chanced the impeachment process of former president Dilma Rousseff.
Check below the repercussions of the first panelaço of the “new era”, which was recorded in countless regions all over the country.
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There’s so much smoke from wildfires in the Amazon rain-forest that São Paulo plunged into darkness on Monday afternoon (Aug. 19), with day turning into night.
The atmosphere, reminiscent of Mordor in “The Lord of the Rings,” was a reminder that forest fires in the Amazon have surged 82% this year compared with the same period last year (from January to August), according to data from the Brazilian government’s National Institute for Space Research (INPE), as reported by El Pais.
That smoke, combined with clouds and a cold front (it’s winter in the Southern Hemisphere), led to the midnight-like darkness in São Paulo, The Washington Post reported. The fires are largely burning in northern Brazil and have prompted the Brazilian state of Amazonas to declare a state of emergency.
“The smoke didn’t come from fires in the state of São Paulo, but from very dense and wide fires that have been happening for several days in [the state of] Rondônia and [the bordering country] Bolivia,” Josélia Pegorim, a meteorologist with Climatempo, said in an interview with Globo (translated from Portuguese with Google Translate). “The cold front changed direction, and its winds transported the smoke to São Paulo.”
The Rondônia fire, located near Bolivia, has burnt nearly 2,500 acres (1,000 hectares). This blaze’s thick smoke is prompting health concerns and has already forced an airplane to be diverted due to visibility concerns, according to Painel Politico, a Brazilian publication. This fire is reportedly human-made, Painel Politico noted, which is fairly common for fires in Amazonia.
For much of the year, fires are rare in the Amazon. But during the drier months of July and August, “many people use fire to maintain farmland and pastures or to clear land for other purposes,” NASA’s Earth Observatory reported last week.
(This human-made-fire situation isn’t so different from what the United States faces. From 1992 to 2012, 84% of the 1.5 million reported wildfires in the U.S. were caused by people while 16% were ignited by lightning strikes, a 2017 study published in the journal Proceedings of the National Academy of Sciences found.)
Huge areas of the Amazon rain-forest are burning from human-made fires, as shown by this satellite image taken Aug. 13.
(Image credit: NASA Earth Observatory images by Lauren Dauphin, using MODIS data from NASA EOSDIS/LANCE and GIBS/Worldview, VIIRS data from NASA EOSDIS/LANCE and GIBS/Worldview, and the Suomi National Polar-orbiting Partnership)
“Wildfires in the Amazon are not natural events but are instead caused by a combination of droughts and human activities,” researchers of a 2018 study in the journal Nature Communications wrote in The Conversation. “Both anthropogenic climate change and regional deforestation are linked to increases in the intensity and frequency of droughts over Amazonia.”
The fire-drought alternation leads to a nasty feedback loop. Trees store less water during droughts, so their growth slows, meaning they can’t remove as much carbon dioxide, a greenhouse gas, from the atmosphere, the researchers wrote in The Conversation. These trees then drop extra leaves or die, in effect providing tinder for fires. And without a dense canopy to keep in the moisture, the forest loses some of its humidity, which normally prevents fires from starting.
“These changes are exacerbated by ‘selective logging’ of specific tree species, which opens up the canopy and further dries out the under story and forest edges, which are drier than the interiors,” the researchers wrote. “The result: normally fireproof rainforests become flammable.”
The fires are so bad that the hashtag #PrayforAmazonia was trending on Twitter this morning (Aug. 20). This news follows on the heels of another concerning development: Deforestation in the Amazon spiked 278% in July, according to satellite data from the INPE. Brazilian President Jair Bolsonaro, a climate change skeptic who has promised to open the Amazon to industry, disputed the satellite findings and promptly fired the INPE’s director-general, Ricardo Galvão.
In the meantime, studies show that deforestation could starkly alter the Amazon. If 20% to 25% of the Amazon becomes deforested, the landscape could transform from a forest into a savanna. Currently, deforestation is at 17%, Mongabay reported.
What’s clear is that deforestation affects more than just the Amazon, as the residents of São Paulo found out yesterday. One Twitter user there even called it #gothamcity, referencing Batman’s grim metropolis.
Area where the plane disappeared in Amapá, northern Brazil | Image: Reproduction/Google Maps
On December 2nd, a small plane took off around Matawaré village, deep in the Amazon rainforest, in the northern state of Amapá. On board was an indigenous woman of the Akuriyó group, her son-in-law, and a family of the Tiriyó group – a teacher, his wife, and three small children. The pilot was Jeziel Barbosa de Moura, 61, who is experienced in the region.
The region’s indigenous people frequently fly from the most remote villages to the town of Laranjal do Jari, located 265 km away from the state capital, Macapá (the journey by car from one to the other takes around four hours). A one-hour chartered flight costs around 3000 Brazilian reais (around 770 USD).
Twenty-five minutes after takeoff, Jeziel sent a radio message saying that he needed to make an emergency landing. Radar contact with the plane was lost after that. According to information from the news outlet G1, he was flying clandestinely without having previously disclosed a flight plan.
Fifteen days after the plane went missing, the Brazilian Air Force announced they were suspending searches for survivors. The mission amounted to 128 hours of flight in total. Two planes and a helicopter searched an area of 12,000 km2, roughly equivalent to 12,000 football pitches. However, the thick forest made the work difficult.
According to state news agency Agência Brasil, friends of the pilot and indigenous people from four groups – Apalai, Akuriyó, Tiriyó and Waiana – continued the search on their own, on the ground, until a month after the disappeareance, in January 2. The Association of Indigenous Peoples and Organizations of Amapá State and Northern Pará published a message condemning the Air Force’s decision to suspend the search.
The group recalled that the improvement of landing strips for indigenous communities is a longstanding issue. This negligence could have hindered rescue searches. G1 reports that there are 49 landing strips yet to be brought up to official standards in indigenous territories across Brazil, according to the Federal Prosecution’s Office. In Amapá state alone, “there are 17 irregular strips, which are used for the transport of health and education professionals, and indigenous people themselves”.
This case, although noted by some national websites and newspapers, has not made to the main headlines in Brazil. Eight people disappeared in the world’s largest rainforest and most of the country has not even heard about it.
G1, a large mainstream online news site in Brazil that has been following the case, talked to relatives of passengers and the pilot. All of them said they were in “despair” and that they were waiting for help from the Army to search for the disappeared in the thick forest. The fear is heightened because it is a race against time.
My father knows the region, he has been flying for a long time, so we know that he tried to land somewhere, but that in the forest it is difficult to find. We know the difficulty of air rescue, but we want to find him, and so we gathered some miners and indigenous friends of my father, who are in the forest. But we want help from the Army which is prepared for this.
Sataraki Akuriyó, son of the oldest passenger on board told the website:
My mother I won’t see again, and so I wanted to find at least the plane or her body. Since they fell I have been suffering a lot.
On the same day the Air Forced announced the end of the searches, then president-elect Jair Bolsonaro, who took office on January 1st, declared his intention to revise the demarcation of the indigenous reserve Raposa Terra do Sol, so that it can be exploited it in a “rational way”.
Within the reserve’s 1.7 million hectares, there are around 17,000 indigenous people from five groups – Macuxi, Wapixana, Ingarikó, Taurepang and Patamona. In an article, lawyer Lucio Augusto Villela da Costa recalled that the area is “known for being rich in minerals such as tin, diamonds, gold, niobium, zinc, caulim, amethyst, copper, diatomite, barytes, molybdenum, titanium, limestone, as well as having the second largest reserve of uranium on the planet.”
The website De Olho nos Ruralistas (“eye on the ruralists”, in English) which reports on conflicts over land and politics in Brazil, interviewed the anthropologist Denise Fajardo, researcher at the Institute for Research and Training in Indigenous Education, about the case of the disappeared plane. For her, the current political approach and the way that the case has been reported are not isolated:
The matter is not being discussed because the lives of indigenous people is not important at the moment, we are living through an anti-indigenous time and they are considered to be an obstacle to the country’s development. We can draw parallels even with the children lost in a cave in Thailand, which has had more attention from the press.
She added that indigenous people from the region often leave their villages to deal with personal matters and that there they feel isolated.
The Tumucumaque National Park is a small area which belongs to them and was where the state put them, or rather where the state isolated them. The region is difficult to access and no means of transport are provided to this population, who stay confined there to the village.
The village Mataware, where the disappeared plane left from, is only accessible bycanoe or plane. In the night of 17 December, another plane carrying indigenous passengers had an accident in the Amazon. This time, near the border with Peru. The three passengers were rescued alive by the Air Force.
That’s a lot of Congresspeople who may soon have some very valid questions about facial recognition and its potential to be abused — particularly since Amazon thinks the ACLU didn’t use it properly to begin with!
It turns out that the ACLU got its mugshot matches by using the Rekognition software at its default 80-percent confidence threshold setting, rather than the 95-percent plus confidence level that Amazon recommends for law enforcement agencies.
“While 80 percent confidence is an acceptable threshold for photos of hot dogs, chairs, animals, or other social media use cases, it wouldn’t be appropriate for identifying individuals with a reasonable level of certainty. When using facial recognition for law enforcement activities, we guide customers to set a threshold of at least 95 percent or higher,” an Amazon spokesperson told CNET by email.
But an ACLU lawyer tells CNET that Amazon doesn’t necessarily steer law enforcement agencies toward that higher threshold — if a police department uses the software, it’ll be set to the same 80-percent threshold by default and won’t ask them to change it even if they intend to use it to identify criminals. “Amazon makes no effort to ask users what they are using Rekognition for,” says ACLU attorney Jacob Snow.
A source close to the matter tells CNET that when Amazon works with law enforcment agencies directly, like the Orlando Police Department, it teaches them how to reduce false positives and avoid human bias. But there’s nothing to necessarily keep other agencies from simply using the tool the same way the ACLU did, instead of developing a relationship with Amazon.
But the ACLU worries that Amazon’s false positives might bias a police officer or government agent to search, question or potentially draw a weapon when they shouldn’t — and we’ve all seen how those encounters can turn deadly. And the ACLU notes that Amazon’s tech seems to have over-represented people of color.
The ACLU also provided CNET this statement:
Amazon seems to have missed, or refuses to acknowledge, the broader point: facial recognition technology in the hands of government is primed for abuse and raises significant civil rights concerns. It could allow – and in some cases has already enabled – police to determine who attends protests, ICE to continuously monitor immigrants, and cities to routinely track their own residents, whether they have reason to suspect criminal activity or not. Changing the threshold from 80 to 95 percent doesn’t change that. In fact, it could exacerbate it.
Should Congress regulate facial recognition? Microsoft thinks so, and now 28 members of Congress have some very personal food for thought — 95-percent confidence threshold or no.
In the hours since the ACLU’s test was brought to light, five Congressmen have sent letters to Amazon CEO Jeff Bezos asking for answers and an immediate meeting. You can read the letters here.
Update, 12:44 a.m. PT: Added that five Congressmen have sent Amazon CEO Jeff Bezos letters with questions about the facial recognition tech. Also added that Amazon’s tech appears to have over-represented people of color, according to the ACLU.
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A Canadian man was reportedly killed in the Peruvian Amazon after indigenous community members blamed him for the death of a spiritual leader.
According to Peruvian prosecutors, the body of Sebastian Woodroffe, 41, was found by police after a video of his lynching surfaced on social media Friday, Reuters reports. Video footage reportedly shows a man in a puddle before another man wraps a rope around his neck and dragged him as onlookers watched.
Woodroffe’s body was found 0.6 miles away from the home of Olivia Arévalo, the spiritual leader of the Shipibo-Conibo tribe and an indigenous rights activist. The 81-year-old died Thursday after being shot twice, and some members of the outraged community blamed her apparent murder on Woodroffe, who was believed to have been one of her clients.
Canada’s foreign affairs department offered its “deepest condolences following the reported assassination of Olivia Arévalo Lomas, an indigenous elder and human rights defender,” Reuters reports.
Arévalo’s death follows a slew of unresolved murders of indigenous activists who were threatened for opposing illegal loggers and palm oil growers, according to Reuters. There is little oversight in the Peruvian Amazon where local communities often punish suspected criminals according to local customs without official state involvement.
“We will not rest until both murders, of the indigenous woman as well as the Canadian man, are solved,” Ricardo Palma Jimenez, the head prosecutor in Ucayali, told Reuters.
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Superyachts and other smaller luxury vessels sit moored in the Port de Fontvieille in Monaco, on Monday, May 18, 2015.
Just 42 people own the same amount of wealth as the poorest 50 percent worldwide, a new study by global charity Oxfam claimed.
In a report published Monday, Oxfam called for action to tackle the growing gap between the super-rich and the rest of the world. Approximately 82 percent of the money generated last year went to the richest 1 percent of the global population, the report said, while the poorest half saw no increase at all.
The report is timely as the global political and business elite gathers in snow-clad Davos for the World Economic Forum‘s annual meeting this week, which aims to promote responsive and responsible leadership.
Oxfam said its figures, which some observers have criticized, showed economic rewards were “increasingly concentrated” at the top. The charity cited tax evasion, the erosion of worker’s rights, cost-cutting and businesses’ influence on policy decisions as reasons for the widening inequality gap.
The charity also found the wealth of billionaires had increased by 13 percent a year on average in the decade from 2006 to 2015. Last year, billionaires would have seen an uptick of $762 billion — enough to end extreme poverty seven times over. It also claimed nine out of 10 of the world’s 2,043 billionaires were men.
David Ryder | Getty Images
Booming global stock markets were seen as the main driver for a surge in wealth among those holding financial assets last year. The founder of Amazon, Jeff Bezos, saw his wealth balloon by $6 billion in the first 10 days of 2017 — leading to a flood of headlines marking him as “the richest man of all time.”
‘Something is very wrong’
Mark Goldring, chief executive of Oxfam GB, said the statistics signal “something is very wrong with the global economy.”
“The concentration of extreme wealth at the top is not a sign of a thriving economy but a symptom of a system that is failing the millions of hard-working people on poverty wages who make our clothes and grow our food,” he added.
Oxfam has published similar reports over the past five years. At the start of 2017, Oxfam said eight billionaires from around the globe had as much money as the 3.6 billion people who make up the poorest half of the world’s population. Improved data has seen last year’s figure revised to 61, but the charity said the trend of widening inequality was still evident.
The report, “Reward Work, Not Health,” is based on data from Forbes and the annual Credit Suisse Global Wealth datebook, which has detailed the distribution of global wealth since 2000.
Check out the world leaders and celebrities that are going to Davos this year
Larry Busacca | Getty Images Entertainment | Getty Images
The survey assesses a person’s wealth based on the value of an individual’s assets — mainly property and land — minus any debts they may hold. The data excludes wages and income to determine what he or she is perceived to own. This methodology has attracted criticism in the past, as a student with high debt levels and a high future earning potential would classify as poor under the current criteria.
Nonetheless, Oxfam said even if the wealth of the poorest half of the population was recalculated to remove the people in net debt, their combined wealth would still be equal to 128 billionaires.
With Amazon buying the high-end grocery chain Whole Foods, something retail analysts have known for years is now apparent to everyone: The online retailer is on a collision course with Walmart to try to be the predominant seller of pretty much everything you buy.
Each one is trying to become more like the other — Walmart by investing heavily in its technology, Amazon by opening physical bookstores and now buying physical supermarkets. But this is more than a battle between two business titans. Their rivalry sheds light on the shifting economics of nearly every major industry, replete with winner-take-all effects and huge advantages that accrue to the biggest and best-run organizations, to the detriment of upstarts and second-fiddle players.
That in turn has been a boon for consumers but also has more worrying implications for jobs, wages and inequality.
To understand this epic shift, you can look not just to the grocery business, but to my closet, and to another retail acquisition announced Friday morning.
Men’s dress clothing, mine included, can be a little boring. Like many male office workers, I lean toward clothes that are sharp but not at all showy. Nearly every weekday, I wear a dress shirt that is either light blue, white or has some subtle check pattern, usually paired with slacks and a blazer. The description alone could make a person doze.
I used to buy my dress shirts from a Hong Kong tailor. They fit perfectly, but ordering required an awkward meeting with a visiting salesman in a hotel suite. They took six weeks to arrive, and they cost around $120 each, which adds up fast when you need to buy eight or 10 a year to keep up with wear and tear.
Then several years ago I realized that a company called Bonobos was making shirts that fit me nearly as well, that were often sold three for $220, or $73 each, and that would arrive in two days.
Bonobos became my main shirt provider, at least until recently, when I learned that Amazon was trying to get into the upper-end men’s shirt game. The firm’s “Buttoned Down” line, offered to Amazon Prime customers, uses high-quality fabric and is a good value at $40 for basic shirts. I bought a few; they don’t fit me quite as well as the Bonobos, but I do prefer the stitching.
I’m on the fence as to which company will provide my next shirt order, and a new deal this week makes it a doubly interesting quandary: Walmart is buying Bonobos.
Amazon vs. Walmart
Walmart’s move might seem a strange decision. It is not a retailer people typically turn to for $88 summer weight shirts in Ruby Wynwood Plaid or $750 Italian wool suits. Then again, Amazon is best known as a reseller of goods made by others.
Walmart and Amazon have had their sights on each other for years, each aiming to be the dominant seller of goods — however consumers of the future want to buy them. It increasingly looks like that “however” is a hybrid of physical stores and online-ordering channels, and each company is coming at the goal from a different starting point.
Amazon is the dominant player in online sales, and is particularly strong among affluent consumers in major cities. It is now experimenting with physical bookstores and groceries as it looks to broaden its reach.
Walmart has thousands of stores that sell hundreds of billions of dollars’ worth of goods. It is particularly strong in suburban and rural areas and among low- and middle-income consumers, but it’s playing catch-up with online sales and affluent urbanites.
Why are these two mega-retailers both trying to sell me shirts? The short answer is because they both want to sell everything.
More specifically, Bonobos is known as an innovator in exactly this type of hybrid of online and physical store sales. Its website and online customer service are excellent, and it operates stores in major cities where you can try on garments and order items to be shipped directly. Because all the actual inventory is centralized, the stores themselves can occupy minimal square footage.
So the acquisition may help Walmart build expertise in the very areas where it is trying to gain on Amazon. You can look at the Amazon acquisition of Whole Foods through the same lens. The grocery business has a whole different set of challenges from the types of goods that Amazon has specialized in; you can’t store a steak or a banana the way you do books or toys. And people want to be able to make purchases and take them home on the spur of the moment.
Just as Walmart is using Bonobos to get access to higher-end consumers and a more technologically savvy way of selling clothes, Amazon is using Whole Foods to get the expertise and physical presence it takes to sell fresh foods.
But bigger dimensions of the modern economy also come into play.
A Positive Returns-to-Scale World
The apparel business has long been a highly competitive industry in which countless players could find a niche. Any insight that one shirt-maker developed could be rapidly copied by others, and consumer prices reflected the retailer’s real estate costs and branding approach as much as anything.
That helps explain why there are thousands of options worldwide for someone who wants a decent-quality men’s shirt. In that world, any shirt-maker that tried to get too big rapidly faced diminishing returns. It would have to pay more and more to lease the real estate for far-flung stores, and would have to outbid competitors to hire all the experienced shirt-makers. The expansion wouldn’t offer any meaningful cost savings and would entail a lot more headaches trying to manage it all.
But more and more businesses in the modern economy, rather than reflecting those diminishing returns to scale, show positive returns to scale: The biggest companies have a huge advantage over smaller players. That tends to tilt markets toward a handful of players or even a monopoly, rather than an even playing field with countless competitors.
The most extreme example of this would be the software business, where a company can invest bottomless sums in a piece of software, but then sell it to each additional customer for practically nothing. The apparel industry isn’t that extreme — the price of making a shirt is still linked to the cost of fabric and the workers to do the stitching — but it is moving in that direction.
And that helps explain why Walmart and Amazon are so eager to put a shirt on my back.
Already, retailers need to figure out how to manage sophisticated supply chains connecting Southeast Asia with stores in big American cities so that they rarely run out of product. They need mobile apps and websites that offer a seamless user experience so that nothing stands between a would-be purchaser and an order.
Larger companies that are good at supply chain management and technology can spread those more-or-less fixed costs around more total sales, enabling them to keep prices lower than a niche player and entrench their advantage.
These positive returns to scale could become even more pronounced. Perhaps in the future, rather than manufacture a bunch of shirts in Indonesia and Malaysia and ship them to the United States to be sold one at a time to urban office workers, a company will have a robot manufacture shirts to my specifications somewhere nearby.
If that’s the future of clothing, and quite a few companies are working on just that, apparel will become a landscape of high fixed costs and enormous returns to scale. The handful of companies with the very best shirt-making robots will win the market, and any company that can’t afford to develop shirt-making robots, or isn’t very good at it, might find itself left in the cold.
What It Means for the Economy
If retail were the only industry becoming more concentrated, it would be one thing. But a relative few winners are taking a disproportionate share of business in a wide range of industries, including banking, airlines and telecommunications. A study by the Obama White House’s Council of Economic Advisers found that in 12 of 13 industry sectors, the share of revenue earned by the 50 largest firms rose between 1997 and 2012.
That in turn may help explain why the income gap has widened in recent years. Essentially, the corporate world is bifurcating between winners and losers, with big implications for their workers.
Research by Jae Song of the Social Security administration and four colleagues found that most of the rise of inequality in pay from 1978 to 2013 was because some companies were paying more than others — not because of a wider gap between high-paid and low-paid workers within a company.
“Employees inside winning companies enjoy rising incomes and interesting cognitive challenges,” the Stanford economist Nicholas Bloom, one of the co-authors of that paper, wrote recently in Harvard Business Review. “Workers outside this charmed circle experience something quite different.”
And David Autor of M.I.T. and four colleagues found in a recent paper that the rise of these “superstar firms” — the big winners in the kind of face-off that Walmart and Amazon are now engaged in — is a likely explanation for the decrease in the share of the overall economic pie that is going to workers.
How much of that is because of shifting technology — as opposed to changing corporate behavior, or loose antitrust policy — is an open debate.
What isn’t is this: The decision by Amazon and Walmart to compete for my grocery business — as well as for space in my closet — are tiny battles in a war to dominate a changing global economy.
And for companies that can’t compete on price and technology, it could cost them the shirt off their backs.
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